Following is a question by the Hon Chan Hak-kan and a reply by the Secretary for the Environment and Ecology, Mr Tse Chin-wan, in the Legislative Council today (November 2):
 
Question:
 
      It has been reported that due to a rise in fuel costs, the electricity tariffs of the two power companies have increased significantly this year and have shown no sign of coming down so far. On alleviating the burden of electricity tariffs on members of the public as well as small and medium enterprises (SMEs), will the Government inform this Council:
 
(1) as it has been reported that Russian crude oil has been sold at concessionary prices of a 25 per cent discount in recent months, whether it knows if the two power companies have considered purchasing energy from Russia to reduce the rate of increase in electricity tariffs;
 
(2) given that the rise in fuel prices involves international factors and is beyond the control of the two power companies, whether the Government will, by drawing reference from the practices of other governments, roll out mitigation measures, or extend the implementation period of the Electricity Charges Relief Scheme, so as to alleviate the burden of electricity tariffs on members of the public and SMEs; and
 
(3) in respect of aspects such as enhancing building energy efficiency and encouraging members of the public to reduce electricity consumption, of the Government's plans to enable "smart electricity consumption" to be further put into practice in Hong Kong by promoting the application of smart technologies, so as to assist members of the public and SMEs in reducing expenditure on electricity tariffs?
 
Reply:
 
President,
 
     All along, the Government's policy is to ensure that electricity needs of the community are met safely, reliably and efficiently at reasonable prices and to minimise the environmental impact of electricity generation. To put this into action, the Government regulates the electricity market of Hong Kong through entering into the Scheme of Control Agreements (SCAs) with the two power companies. According to the SCAs, the Government monitors the power companies and their electricity-related financial affairs through Development Plans submitted by the power companies as well as the annual Tariff Review and Auditing Review jointly conducted with them. The Environment and Ecology Bureau is now conducting the 2023 tariff review with the two power companies in accordance with the SCAs. Tariff proposals made by the two power companies will be examined stringently with reference to the trends in the international fuel market. It is expected that the result of the review will be available by the end of this year. 
 
     In the past two years, international energy prices keep surging, with individual market prices of crude oil, natural gas and coal registered an increase of 100 per cent, 200 per cent and 500 per cent respectively. Amid the energy crisis aggravated by the conflict between Russia and Ukraine since earlier this year, the international fuel prices accelerate rapidly. This has taken a heavy toll on electricity tariffs worldwide, with the tariff increases in other major cities such as Singapore, Tokyo and London ranged from over 20 per cent up to even 70 per cent, and Hong Kong is no exception. The situation in Hong Kong is relatively better than other places under the regulation of the SCAs. Following the increases in monthly fuel cost adjustments, Hong Kong's overall net tariffs in November also saw an increase of nearly 20 per cent over January this year. Regarding electricity tariff for residential customers in general, the current tariffs per unit of electricity of CLP and HK Electric are $1.42 and $1.52 respectively; whereas the respective residential tariffs in Singapore, Sydney, London and Berlin were $1.74, $2.03, $3.00 and $3.66 per unit of electricity in last month. Therefore, the tariff in Hong Kong is still competitive.
 
     Hong Kong has enjoyed a stable electricity supply with relatively moderate increases in tariffs, thanks to our regulatory regime. The SCAs capitalise on the advantages of two models, namely government monitoring and commercial operation. Under the SCAs, the Government critically examine capital expenditures of the two power companies to avoid excessive or unnecessary investments, thereby stabilising tariff rates and providing sufficient incentives for ensuring a stable power supply. Meanwhile, cut-throat competitions are eradicated and power supply will not be disrupted by closure of power companies. In times of energy crisis, the two power companies can make timely and flexible deployments under their commercial operation models so that a stable supply of electricity may be maintained, causing less impact on tariff rates. Moreover, fuel cost is charged to customers on actual basis such that the power companies cannot make any profits therefrom.
 
     My reply to the question raised by the Hon CHAN Hak-kan is as follows:
 
(1) In order to ensure stable power supply in the territory, the Government has kept abreast of market developments and maintained liaison with the two power companies. Of the two power companies' existing fuel mix for electricity generation, nuclear power from Daya Bay accounts for about 30 per cent, while the remaining is mainly natural gas imported from the pipelines in Mainland and coal accounts for about a quarter. The natural gas purchased by the two power companies is sourced from multiple channels so as to control and diversify the risks of their fuel supply mix. In order to obtain the lowest price, majority of them are long-term contracts with "take-or-pay" clause as well. Therefore, purchasing natural gas from other suppliers will only add burden to the fuel cost. As for coal-fired generation, the two power companies make advance purchases from suppliers as far as possible to ensure stability in price and supply. Besides, fuel oil is mainly used as fuel for the operation of back-up generating units which has little to do with the tariff. Hence, both power companies have not purchased any crude oil from Russia. 

     The two power companies are jointly constructing an offshore liquefied natural gas (LNG) terminal in Hong Kong waters. Upon completion of the terminal, the two power companies will be able to purchase LNG from international markets direct, thereby enhancing their bargaining power and reducing the tariff pressure. As coal price has risen sharply in recent years and the two power companies are gradually using cleaner energy for electricity generation, the demand for coal-fired energy will continue to decline.
 
(2) The Government will continue to provide a monthly relief of $50 for each eligible residential electricity account since 2019 until the end of 2023. A new round of electricity charges subsidy of $1,000 in total for residential accounts was also launched in June this year until May next year. In addition, the two power companies have provided support measures under their respective Community Energy Saving Funds to assist customers from small and medium-sized enterprises and disadvantaged groups. 

     We would like to point out that international energy prices are affected by an array of factors and the future outlook is still relatively uncertain. Provision of subsidy by the Government is not a long-term sustainable option, and it will end up with a heavy burden on public finance. The best way to tackle this is to save energy. The prevailing technology allows ample room for electricity saving. All sectors of our community can also join hands to save energy by making changes in electricity consumption patterns and lifestyle choices. These result in energy consumption at the global level as well as electricity expenses being reduced altogether, hence offsetting the impact of fuel cost increases.
 
(3) As to the application of smart technologies, enhancing the transparency of data and benchmarks helps mobilise the community to achieve "smart electricity consumption" and take collective actions to conserve energy. The Electrical and Mechanical Services Department has launched the Online Building Based Electricity Utilisation Index Benchmarking Tool which allows users to unveil energy saving opportunities through comparing and reviewing the annual overall electricity utilisation performance of commercial buildings. The tool also provides energy saving advice. Also, through the Carbon Neutrality Partnership, the Government encourages public and private sectors to set energy-saving and carbon-reduction targets, and share their measures and results with the public. 

     Through the E&M InnoPortal, the Government matches innovative and technological solutions developed by enterprises and academic institutions with service needs from the Government, public organisations as well as the electrical and mechanical trades, and to conduct pilot projects in a collaborative manner. More than 160 projects are being tested, of which 40 are energy-saving and renewable energy related projects, including the management of ventilation and air-conditioning system with artificial intelligence algorithms.
 
     In order to facilitate and promote "smart electricity consumption", the two power companies are continuing to install smart meters for their customers in phases, and expect completion by 2025. At present, nearly two million customers have been using smart meters which help them monitor and manage electricity consumption more effectively, thereby encouraging energy saving.
 
     Lastly, the Government has put in place the Energy Saving for Allwebsite to help the community reduce energy consumption, ease the burden of electricity expenses and enable the realisation of "smart electricity consumption" in Hong Kong.
 
     Thank you, President.

Ends/Wednesday, November 2, 2022
Issued at HKT 15:20

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